Why supply chain oversight is critical for business

All businesses, from the smallest ventures to the largest enterprises, have supply chains and a need for supply chain oversight. Whether it’s the raw materials made into the product you sell, or the office equipment and software you procure for your service-based business, you’ll always have dependencies and a need to maintain oversight over your personal supply chain.

In any of these cases a business might be at the end of the chain, providing a finished product for market or a completed service to a customer, or somewhere along the chain providing components (either sourced or produced from composite materials) to a customer for their own work on a product or service.

Supply chains can be complex and if one, small part of a finished product becomes unavailable, the whole production line can grind to a halt. Poor quality materials or bad business practice at one end of the supply chain can also negatively impact all businesses at the other end, so it’s vitally important that supply chain oversight and management is a key focus for any organization. The better that understanding, the better equipped the business is to take action when action is needed.

Resilience through supply chain oversight

Businesses have to ensure their supply chain functions efficiently and key to that is understanding what components are required to produce defined outputs, where they come from, what the lead times and costs are, and how it all fits together. These are matters of logistics and partner relationships, a key part of supply chain management.

“By meticulously monitoring each stage of the supply chain, organizations can identify inefficiencies, optimise processes, and minimise costs, ultimately enhancing their bottom line,” says Chris Laws, VP of Supply Management Solutions International at Dun and Bradstreet.

But there is more to it than that. Product recalls in some areas are not uncommon – as consumers we see them with food, white goods like fridges, or even cars. When something goes wrong and a product is recalled, it’s important that the end business in the chain can identify what caused the problem, such as where a faulty component was sourced, or where harmful elements entered a product.

In the tech sector, these concerns often materialize in the form of supply chain cyberattacks, in which overlooked vulnerabilities in third party software put businesses at risk. Nearly all FTSE100 companies were exposed to supply chain attacks between 2023 and 2024, while globally just under two-thirds of all large organizations fell victim. It’s against this backdrop that the EU Commission has brought in the Digital Operational Resilience Act (DORA) and organizations all over the world are looking to improve their supply chain oversight.

“Any bad publicity because of malpractices significantly impacts the company’s share price as the market reacts negatively,” says Atanu Chaudhuri, professor of Technology & Operations Management at Durham University Business School.

“A company may take years to recover. Without supply chain oversight, a company is susceptible to such shocks.”

In addition, there are also increasingly important areas such as environmental, social, and governance (ESG) initiatives and regional compliance measures. “With increasing ESG regulations, notably the EU’s Corporate Sustainability Reporting Directive (CSRD), gaining and maintaining supply chain oversight has become essential to any business that aims to respond with agility to risks, maintain its reputation and customer service and to ultimately improve the alignment of day-to-day operations and long-term goals,” explains David Food, head of supply chain marketing at Board International.

Proving provenance

Supply chain management is also important for proving provenance. Suppose your organization needs to prove it uses sustainably sourced card and paper. The supply chain management system you implement can play its part in showing how and where this product was sourced and if it meets international standards and requirements or customer demands.

“By employing digital ledgers and leveraging the right tools, automation and technology, organizations can ensure provenance in their supply chains,” says Laws. “These digital ledgers, such as blockchain can thoroughly record each detail of the supply chain journey.”

They make real-time tracking entirely achievable too, which not only helps with compliance, but also helps with risk management by showing how far away from you particular essential components are.

Chaudhuri proposes supply chain mapping as another good technique. He said, “Once a map is created, companies can start getting additional insights in terms of things like the certifications a supplier has, their labour practices, environmental responsibilities and actions and so on.”

Best practice for problem solving

In the end, the business itself is responsible for ensuring its supply chain management is good enough for it to meet its commitments to the standards it must adhere to and identifying where issues may have occurred. Chaudhuri is unequivocal on this: “Supply chain oversight itself cannot be outsourced”.

Beyond that, though, what does a company do when a problem is identified and it has to manage the issue? Chaudhari suggests that cancelling contracts is the wrong approach, arguing instead to turn to support, guidance, training, and investment once you know where a supply chain problem occurred. After all, your supply chain is also a value chain – it creates value for you and for your suppliers – and cutting a hole in the chain won’t do anything for profitability.

Additionally, it is important to try to avoid problems arising in the first place, and supply chain infrastructure can help here. It can include some outsourcing, including to third-party specialist companies. Food tells ITPro that “the provision of dashboards and data visualization capabilities can be outsourced to drive and monitor change and opportunities, but also facilitate and organize large amounts of data”.

But he also notes that without the means and will to maintain this data, this approach can easily fall apart. Without an equal investment in providing accurate information to systems, dashboards become outdated and unreliable so are little help for predicting or fixing problems.

Understanding and monitoring your supply chain can provide many advantages to a business. Inventory management is only part of it. Forecasting problems down the line using technology like predictive AI, managing compliance information, understanding supplier needs, and finding the sources of particular issues in order to fix them and prevent future occurrences are all part of the role of good supply chain management.